Aerospace & Defense Update
In 2018, the Pentagon is hoping to increase the speed of its foreign military sales process. To decrease procurement times, the Pentagon’s top acquisition official, Ellen Lord, has launched six Procurement Action Lead Time pilot programs designed to cut the time from requests for proposal to procurement. These time-saving measures are expected to increase 2018 foreign weapon sales from $42.0 billion in 2017, a 20% increase over 2016 levels. 2018 foreign weapon sales will be further bolstered by Defense James Mattis’ initiative to scale up defense capabilities of U.S. allies and the Trump administration, which sees foreign weapon sales as a key to growing U.S. jobs.
The Head of the U.S. Strategic Command, General John Hyten, is calling for the Department of Defense (“DoD”) to transform its satellite development process through the adoption of a more commercially-oriented procurement methodology. Commercial manufacturers have been able to successfully deliver complex satellites at fixed prices and within a 30 – 36 month window, commercial providers may also be less burdened by the stringent procurement requirements and program delays that often plague current DoD satellite production processes. The DoD’s current acquisition strategy currently siloes three key elements of the satellite system (space, ground, and terminal), but Gen. Hyten hopes to streamline the process through one intertwined acquisition strategy. Through streamlining the methodology, the DoD expects to increase technological readiness and agility, allowing it to deploy smaller, lower-cost satellites.
Government Technology Solutions
Similar to 2017, IT modernization remains the primary focal point of the federal IT community in 2018. However, three key emerging trends will drive technology solutions and adoption in the government sector. First, federal agencies, including the DHS, FBI, and DOD, are increasing their use of biometric authentication systems. Specifically, iris recognition technology and facial scanning that enable agencies to implement deeper and more accurate security measures. As such, the biometric authentication systems market is expected to grow at a rate of ~14% through 2020. Second, the industry is expected to increase its use of federal contractors in 2018 to allow for greater project agility and efficiency. Lastly, the federal IT community is expected to adopt automation technology to more effectively utilize current resources, with examples potentially including automated budget processing to replace traditional Excel spreadsheets.
The Government Accountability Office (“GAO”) publicly released a report on December 21, 2017 detailing a two-and-a-half-year exercise during which undercover GAO agents purchased firearms, to include an AR-15 rifle and an Uzi submachine gun, on the dark web. The GAO described the exercise as an attempt to assess the extent to which the Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”) enforces existing laws in prohibiting firearm sales to people not allowed or eligible to possess a firearm. On the surface web, federal regulations held up well as the GAO was unsuccessful in 72 unique attempts to purchase a firearm. However, the GAO managed to purchase two firearms, as part of an investigation that included seven purchasing attempts, on the dark web. The report offered no recommendations but illustrates the current shortcomings of online federal law enforcement.
Kratos Defense & Security Solutions (up 10.8%) – Share prices were up this week after the company received a $93 million award for unmanned aerial drone systems and a $20 million award for electronic warfare systems.
Bombardier (down 5.5%) – Share prices were down this week after the company delivered 17 C Series jets in 2017, short of its target of 20-22 jets.
Chenega Corp. has completed its acquisition of privately held ADG Creative, a provider of strategic communications and digital transformation solutions. KippsDeSanto & Co. served as the exclusive advisor to ADG on this transaction. Terms of the deal were not disclosed.
Coolisys Technologies, Inc. has agreed to acquire Enertec Systems 2001 Ltd., a provider of missiles, UAVs, tanks, combat aircraft, missile boats and submarines, mobile trailers, and satellites. The deal is worth an estimated $9.2 million.
Edmund Optics, Inc. has acquired ITOS GmbH, a provider of optical components, including filters and polarizers. Terms of the deal were not disclosed.
UST-Aldetec has acquired Pioneers Magnetics, Inc., a provider of state-of-the-art switching power suppliers for defense and telecommunications platforms. Terms of the deal were not disclosed.